# Mediation / Suppression Decomposition

## Z₁ Coefficient Across Specifications

| Model | Z₁ Coef | p-value | Sig | N | R² |
|---|---|---|---|---|---|
| Rating (no fiscal) | 14.3132 | 0.0166 | ** | 2,154 | 0.445 |
| Rating (+ fiscal_bal) | 14.4783 | 0.0183 | ** | 2,087 | 0.453 |
| Rating (+ fiscal_bal + debt) | 15.9871 | 0.0071 | *** | 2,048 | 0.485 |

## Correlations

| Pair | Correlation |
|---|---|
| Z₁ ↔ govt_debt_gdp | +0.310 |
| Z₁ ↔ fiscal_bal_gdp | +0.030 |
| Z₁ ↔ rating_numeric | +0.639 |
| govt_debt_gdp ↔ rating_numeric | -0.037 |

## Interpretation

The Z₁ coefficient **increases in magnitude** when fiscal controls are added. This is classical **suppression**, not mediation.

- Without fiscal controls: Z₁ = 14.3132
- With fiscal_bal + debt: Z₁ = 15.9871
- Change: +1.6739 (+11.7%)

**Mechanism**: Older countries (high Z₁) tend to be richer OECD nations with higher debt-to-GDP but also structurally better credit ratings. The positive Z₁-debt correlation creates downward bias in the Z₁ coefficient. Controlling for debt removes this confound, revealing the true (larger) positive aging-rating association --- that is, aging is associated with higher ratings conditional on debt, likely reflecting the institutional quality and development that correlates with demographic maturity.